Internet video giant Netflix announced a defensive maneuver on Monday designed to fend off famed corporate raider Carl Icahn, who has amassed a sizable stake in the company and suggested it should be sold. Netflix’s “poison pill” defense, which would make it much more difficult for Icahn — or anyone else — to mount a hostile takeover, comes as the streaming pioneer struggles to regain traction amid intense competition in the online-video space.

Netflix’s dispute with Icahn underscores the company’s vulnerability following several quarters of lackluster financial performance. And it’s just the latest example of Icahn, a relentless Wall Street operator, directing his attention toward a major company he believes is undervalued.

Put simply, if you’re a corporate CEO or board member, and Icahn takes a large stake in your company, you’ve got a problem. So it’s no surprise that Netflix has responded with a poison-pill defense, which is a tactic used by companies that feel threatened by unwanted suitors.

Under the plan, which would be triggered if an individual shareholder amasses more than 10% of the company’s shares, existing shareholders would have the right to buy more shares in a new series of company stock. That would dramatically increase the amount of Netflix shares on the market, requiring a hostile bidder to buy many more shares than it would have had to previously. This would make a takeover more expensive and thus less attractive for potential buyers.

In a statement on Monday, Netflix said its action is “intended to protect Netflix and its stockholders from efforts to obtain control of Netflix that the board of directors determines are not in the best interests of Netflix and its stockholders, and to enable all stockholders to realize the long-term value of their investment in Netflix.” The company added that the defense is not intended to interfere with any merger or acquisition offer that the board approves. In other words, Netflix is essentially telling Icahn to get off the company’s front lawn.

Netflix’s defensive play comes just days after Icahn disclosed that he had acquired 9.98% of the company’s shares. In a Security and Exchange Commission (SEC) filing, Icahn said he bought the stake “with the belief that the shares were undervalued due to the [Netflix’s] dominant market position and international growth prospects.”

Icahn added that he believes Netflix “may hold significant strategic value for a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the Internet, mobile and traditional industry.” That’s not-so-subtle financial jargon, which, when translated, indicates that Icahn believes the best outcome for Netflix could be a sale to a larger technology or media company.

Netflix shares soared by 13% after Icahn disclosed his stake, as investors speculated that the company could be sold for a premium. In an interview with Bloomberg TV on Oct. 31, Icahn suggested that Verizon, Amazon, Microsoft and Google might be interested in snapping up Netflix, which has a market value of $4.3 billion. “I think Netflix should be consolidated, in my opinion,” Icahn told the network, though he added that he has not put forward any specific proposals for such an outcome — yet.

Barclays analyst Anthony DiClemente believes Icahn could eventually be successful in his quest to put Netflix on the block. “Due to the fundamental changes facing the business today, including increased domestic competition and rising content costs, we believe other shareholders would be willing to partner with Icahn in his efforts to force a sale,” DiClemente wrote in a note to clients.

But other analysts have questioned why any of the big tech or media giants would want to buy Netflix. “Subscription streaming of premium video content is simply not a core component of any of these companies, meaning the question is not how these companies could help Netflix, but how owning Netflix would help them sell devices from smart phones to tablets to gaming systems,” BTIG’s Rich Greenfield wrote in a note to clients.

Icahn’s gambit clearly rattled Netflix, hence the poison-pill defense. For his part, Icahn is not amused by the company’s reaction, and he issued a blistering statement in an SEC filing on Monday afternoon, in which he blasted the poison pill. He called the move “an example of poor corporate governance” and added that he found the move “particularly troubling due to its remarkably low and discriminatory 10% threshold.” Icahn also called for the company’s directors to be elected at the same time, as opposed to the current system, in which board elections are staggered, which means that it would take two years for Icahn to obtain a majority of the board.

Netflix was an early pioneer in online video streaming, but the company faces increasing competition from powerful content companies and Internet rivals like Comcast, Verizon, Blockbuster/Dish Network, HBO and Amazon. The company also faces increasing content costs, because the big Hollywood studios and content owners are not thrilled about an upstart rival gobbling market share on the back of their products and are raising their prices.

Last month, Netflix reported that quarterly profit had plunged, in part because the company is adding fewer streaming-video subscribers than it had expected. It was just the latest stumble for the company. Last year, Netflix ignited a firestorm after raising prices by 60% on customers who subscribed to the joint DVD-by-mail and online-streaming package. Then, the company was forced to scrap plans to rename its DVD service Qwikster and spin it off, after customers revolted against the plan.

After seeing its stock price rise above $300 as recently as July 2011, Netflix shares have returned to earth and are now trading below $80. This is a classic Icahn scenario, in which he identifies a company he feels is undervalued, and then moves in to agitate for management reform or an outright sale. Earlier this year, he was instrumental in forcing troubled energy giant Chesapeake to shake up its board, in a move that was widely praised by analysts.

By now, Wall Street knows better than to underestimate Icahn, a 76-year-old from Queens, New York, with a reputation as a bare-knuckled business brawler. Netflix was already grappling with slowing subscriber growth and fierce competition. Now, the company must contend with the unwanted advances of one of the most legendary financiers in American business. So grab your popcorn and settle into your favorite easy chair. This movie is going to be fun to watch.

Carl Ichan, is a fracking ghoul. He casts his eye over all industries and then screws around with existing companies. Slightly akin to a bully picking up butterflies and deciding that they would be better off without wings and then going his way when the butterfly eventually dies.